Gas hungry China trims back shale goal

A natural gas appraisal well of Sinopec is seen behind a treatment pond of drilling waste in Langzhong county, Sichuan province (Reuters / Stringer) / Reuters

China has halved its 2020 goal for shale gas production. The country faces challenges ranging from difficult geology to shortage of technology in the area meant to quench its ever-growing energy needs.

The country is only
starting mass production of shale gas, which drastically changed
the energy landscape in the US in recent years, with the
extraction of 200 million cubic meters annually.

In 2012, when Chinese shale gas production was virtually
non-existent, Beijing eyed an ambitious goal of 60-80 billion
cubic meters (bcm) by 2020, but the latest plans from the
Ministry of Land and Resources on Wednesday lowered it to more
conservative 30 bcm. A higher figure is possible, but
conditional.

"China aims to pump at least 30 billion cubic meters of shale
gas by 2020. With proper drilling technology, output can increase
to 40 to 60 billion cubic meters," Che Changbo, deputy
director of the ministry's geological exploration department,
said at a news conference in Beijing.

Short-term prospects for shale gas production are more
optimistic, according to the ministry. It will surpass the old
government 2015 target of 6.5 bcm next year and hit 15 bcm in
2017.

The ministry said the economies of scale and localization of
drilling technology are making shale gas more commercially
attractive in China. The cost of one well has fallen from 100
million yuan to 50 to 70 million yuan, while the drill time
dropped from 150 days to between 46 and 70 days.

But the industry is still hurdled by several problems, including
complex geology, shortage of advanced technology and skilled
personnel and regulation barriers. There is also the dominating
position of two state-owned giants, PetroChina and Sinopec, which
enjoy a privileged access to fields discouraging private
investment.

China has been relying for decades on coal for the majority of
its energy production, is undergoing a switch towards cleaner
gas. The country is expected to consume some 311 bcm of the fuel
by 2020, with conventional domestic production supplying only 200
bcm. Shale gas was hoped to reduce the dependence on gas imports.